Questionable acquittals

“Thus, some people created a scam by artfully arranging a few selected facts and exaggerating things beyond recognition to astronomical levels.”

That was how the Central Bureau of Investigation (CBI) Special Judge, O.P. Saini, concluded his 1,553-page judgment on December 21, 2017, in the 2G spectrum allocation case after six long years of trial. The conclusion was bizarre because in 2010 the Supreme Court considered this very case serious enough to merit comprehensive and coordinated investigation by the CBI and the Directorate of Enforcement (DoE) without any hindrance.

Judge Saini acquitted all the 17 accused, holding that the prosecution had failed miserably to prove any of the charges made in its “well choreographed charge sheet”.

The CBI filed its charge sheet in 2011 on the basis of the case it registered in 2009 against unknown officials of the Department of Telecommunications (DoT), unknown private persons/companies and others for criminal conspiracy and criminal misconduct read with offences under the Prevention of Corruption Act (PCA), in respect of allocation of spectrum in 2008 by the Centre. Among the accused was A. Raja, the then Union Minister for Communications and Information Technology (C&IT).

The Supreme Court observed in 2012, while quashing 122 spectrum licences granted to mostly ineligible persons: “The material produced before the court shows that the Minister of C&IT wanted to favour some companies at the cost of the Public Exchequer.” The court then went on to specify the steps taken by Raja for the purpose.

Among these was Raja’s decision to introduce the cut-off date as September 25, 2007, for consideration of the applications received for the grant of Unified Access Services (UAS) licences and spectrum, though the DoT had on September 24 issued a press release fixing October 1, 2007, as the last date for receipt of applications.

“This arbitrary action of the Minister of C&IT, though appears to be innocuous, actually benefited some of the real estate companies who did not have any experience in dealing with telecom services and who have made applications only on September 24, 2007, that is, one day before the cut-off date fixed by the Minister of C&IT on his own,” the Supreme Court bench of Justices G.S. Singhvi and Asok Kumar Ganguly held on February 2, 2012.

The cut-off date, decided by Raja on November 2, 2007, was not made public until January 10, 2008. The first come, first served principle, which had been followed from 2003, was changed by him on January 7, 2008, and the decision was incorporated in the press release dated January 10, 2008.

The first come, first served principle meant that the applicant that applied first would be allocated the Letter of Intent (LoI), licence and spectrum first. This existing procedure was also described, almost correctly, as Alternative I in the DoT letter dated October 26, 2007, addressed to the Ministry of Law & Justice, which was approved by the Minister (Raja) himself. The prosecution alleged that Raja unilaterally changed the policy to benefit select companies.

This, the Supreme Court found, enabled some of the applicants who had access either to the Minister or the officers of the DoT to get their demand drafts, bank guarantees, and so on prepared in advance for compliance with the conditions of the LoIs, which formed the basis for the determination of seniority for grant of licences and allocation of spectrum.

An LoI signifies a serious commitment from one party to another. It is generally used to clarify a transaction or mutual understanding before a full contract is drawn up. The first come, first served principle was implemented by the DoT in a manner that resulted in wrongful gain to certain companies. Further, there were allegations that suspect DoT officials had selectively leaked information regarding the date of issuance of the LoI on January 10, 2008. In the LoI, an arbitrary condition was incorporated: whosoever deposited the fees first would be the first to get a licence. The applicants to whom the information was leaked were ready with the amount and were able to deposit the fee earlier than others.

The Supreme Court further held:

“The manner in which the exercise for grant of LoIs to the applicants was conducted on January 10, 2008, leaves no room for doubt that everything was stage-managed to favour those who were able to know in advance the change in the implementation of the first-come-first-served policy. As a result of this, some of the companies which had submitted applications in 2004 or 2006 were pushed down in the priority and those who had applied between August and September 2007 succeeded in getting higher seniority entitling them to allocation of spectrum on priority basis.”

While making the above observations, the Supreme Court made it clear that these would not affect the pending investigation by the CBI, DoE and other agencies or cause prejudice to those who were facing prosecution in the cases registered by the CBI or who might face prosecution on the basis of charge sheets which might be filed later by the CBI.

“The Special Judge, CBI shall decide the matter uninfluenced by this judgment. We also make it clear that this judgment shall not prejudice any person in the action which may be taken by other investigating agencies under Income Tax Act, 1961, Prevention of Money Laundering Act, 2002, and other similar statutes,” the Supreme Court held in the 2012 judgment.

Reading Special Judge Saini’s judgment could make one realise that although the Supreme Court, in 2012, did not want to influence the pending investigation and trial with its conclusions, the criminal intent of the accused in this case was clearly intertwined with the larger issue of manipulation of the spectrum allocation policy pursued by Raja in 2007-08. While Judge Saini was free to decide the case before him, uninfluenced by the Supreme Court’s previous observations against the accused, prudence required him to take note of the nexus between the two cases. His judgment shows that he did not do that.

Major allegations

The prosecution alleged that Raja had entered into a conspiracy with other accused persons and companies with a purpose to issue UAS licences to Swan Telecom Private Limited (STPL), which had already applied, and companies promoted by Unitech Limited, which were yet to apply. This he did allegedly by manipulating the priority list on the basis of LoI compliances instead of existing guidelines/practice of deciding on applications on the basis of the date of application according to the availability of spectrum.

It was further alleged that Raja adopted the revised procedure for the grant of UAS licences in conspiracy with the other accused, namely, Sanjay Chandra, managing director, Unitech Limited, and Shahid Balwa and Vinod Goenka with an intention to favour Unitech Wireless (Tamil Nadu) Private Limited, and STPL.

Siddhartha Behura, who joined as the Secretary (Telecom) in the DoT on January 1, 2008, was named as another conspirator, along with Raja and his private secretary, R.K. Chandolia.

The next step was to get the stamp of legal approval to the revised procedure by securing the consent of the then Solicitor General (SG), the late G.E. Vahanwati. The SG testified that the issues regarding new LoIs were not before any court and that what was proposed was fair and reasonable. The last paragraph of the draft press release, shown to the SG, read: “However, if more than one applicant complies with LoI condition on the same date, the inter se seniority would be decided by the date of application.”

It was alleged that after the SG cleared the draft press release, Raja struck out the last paragraph and inserted the words “press release appd [approved] as amended”. This was to portray to the DoT that the amended draft had the consent of the SG. This amendment in the press release helped to redefine the concept of “first come, first served” on the basis of priority in submission of compliance to the LoI against the established practice of priority in the order of receipt of applications. The amended press release was issued to the public on January 10, 2008.

Judge Saini found Vahanwati’s deposition contrary to record. The SG had deposed that he had approved only the draft press release.

Saini also accused Vahanwati of recalling facts according to his convenience: While he could not recollect if he had seen the words “Press release appd. as amended”, he could recall that there was no deletion from the press release when he saw it. “It is a case of deliberately denying and disowning the official record,” Judge Saini observed.

Raja deposed that the deletion in the press release took place before the file was sent to the SG. The deleted portion, he further claimed, did not tally with the decision taken in the department and communicated to the Prime Minister.

He also said that the earlier procedure of “first come, first served” was unfair because some people were not complying with the LoI and were seeking extension of time, thus blocking the way of others. Judge Saini found Raja’s answers in the cross-examination cogent, clear and categorical.

Curiously, the judge at one point found A.K. Srivastava, the Joint Secretary in the Ministry of C&IT, an unreliable witness, but when his deposition helped to exonerate Raja, he relied on it. Thus in Paragraph 896, he relied on Srivastava’s statement to conclude that owing to the large number of applications, the earlier procedure was no longer the best option as people would collect LoI but would not comply with it. However, in 2007, the situation was unprecedented as 575 applications were pending disposal. This, according to the judge, established that the change in procedure followed for “first come, first served”, prioritising the date of payment, was contemplated by the department itself and that Raja only conveyed it to the Prime Minister.

The earlier procedure of sequential processing was deemed undesirable in a situation where 575 applications were pending, the judge reasoned.

Corporate veil

The prosecution alleged that after the allocation of spectrum, both STPL and the Unitech Group Companies offloaded their shares.

Thus, Etisalat (Mauritius) Limited subscribed to STPL’s shares for a consideration of about Rs.3,228 crore on December 17, 2008. Genex Exim Venture Private Limited also subscribed to STPL’s shares for Rs.380 crore. Dynamix Balwa Group, promoted by Shahid Balwa and Vinod Goenka, thus earned about Rs.2,818 crore, as Tiger Trustees Limited held by them was holding 90 per cent equity of STPL.

The Unitech Group Companies offloaded shares to Telenor Asia Private Limited, which agreed to infuse extra equity in the companies for a 66.5 per cent stake. The promoters of the Unitech Group Companies thus earned Rs.2,342 crore, the prosecution said.

The judge reasoned that offloading of shares or issue of fresh equity was not prohibited by any rule or guideline. There was no lock-in period prescribed at that time by any rule or guideline, he said. The prosecution, however, alleged that these stakes were sold by the said companies even before the rollout of services by them. The estimated loss to the government caused by the grant of licences to these two companies alone came to Rs.7,105 crore. On a pro rata basis, the estimated loss for all 122 UAS licences issued in 2008 was more than Rs.22,000 crore, the prosecution alleged in the charge sheet.

The prosecution further alleged that STPL was fully funded by the Reliance ADA group out of the funds drawn from various companies of the group to make out its equity and net worth. In order to obtain GSM spectrum, the Reliance ADA group filed applications for licences in 13 service areas and for that it used STPL as a tool, it was alleged.

The defence, on the contrary, argued that on the date of filing of applications, STPL was a company of the DB group and, as such, there was no concealment of the actual owners of STPL.

But Judge Saini refused to lift the corporate veil and examine how STPL was funded, saying it was irrelevant. The corporate veil can be lifted only in case of impropriety by a company with a view to avoid legal liability, he held, and accepted the defence’s claim that on the date of filing of applications, the DB group, and not Reliance ADA, was in control of the company.

Implementing the change in the policy involved establishing four counters to distribute LoIs, in the committee room of the Ministry of C&IT, on the second floor, of Sanchar Bhawan. This subverted the system of “first come, first served” in letter and in spirit. In this design, it was possible to avoid compliance with the requirement that only after the first batch of four applicants had been issued the LoIs, the second batch be called, thus benefiting the accused.

On January 10, 2008, another press release was issued by the DoT in the afternoon, asking the representatives of all applicant companies to collect the LoI at 3:30 p.m. that day from the four counters. It was alleged that the distribution of LoIs in this fraudulent manner resulted in a reshuffling of the priority of applicants from the date of application to the time of compliance, which had differences of a few minutes. This completely changed the priority to the benefit of STPL, which got first priority in Delhi where spectrum for one licencee only was available. Unitech Wireless (Tamil Nadu) Private Limited got the priority for other circles where spectrum was not sufficient to accommodate the last applicant.

Under the ill-conceived design of distribution of LoIs and receipt of LoI compliance/entry fee, applicant company representatives were required to rush to the reception area of Sanchar Bhawan, where the Ministry of C&IT functions. Thus STPL was the first to submit compliances for Delhi and Mumbai circles, and Unitech Wireless (Tamil Nadu) Private Limited was able to get priority in all circles over many other applicants who had applied much before it. This desperate race to the reception area led to chaos, which resulted in a situation in which the physical fitness of the representatives became the main deciding factor for priority in submission of compliance of LoIs and entry fee, making a mockery of the “first come first served” principle.

The prosecution alleged that this change in the design benefited those in criminal conspiracy and led to incidental gains/losses to others. The whole process of allocation of LoIs and licences was thus vitiated and was arbitrary in nature, it said. Both STPL and Unitech had prior knowledge of the ill-conceived design and had kept the demand drafts ready to ensure compliance with LoIs, it was disclosed.

Fee revision

The revision of the spectrum fee for the dual technology entry fee was another contentious issue. The Finance Ministry strongly recommended revision as it felt that the rate of Rs.1,600 crore, determined in 2001, could not be applied for a licence given in 2007 without fresh valuation. The Law Ministry suggested referring the issue to an Empowered Group of Ministers and obtaining the Attorney General’s view. Raja allegedly ignored all suggestions to consider auction or revision of entry fee and gave away licences at the 2001 fee, in criminal conspiracy with the other accused. Thus, it was further alleged, he deprived the government exchequer of possible revenues that could have accrued, even if a level playing field was retained for new operators. The latter argument was a specious plea that Raja and the DoT used to justify the adoption of the 2001 fee, the prosecution said.

Examining the evidence at length, Judge Saini held that there was no material on record indicating that the Telecom Regulatory Authority of India (TRAI) had recommended a revision of the entry fee for 2G spectrum and that there was enough material on record to show that it was a conscious decision of the part of the DoT to not revise the entry fee.

Cut-off date controversy

Judge Saini, in his judgment, unquestioningly agrees with the defence argument that the cut-off date was fixed on account of the receipt of a large number of applications and inadequate availability of spectrum.

The cut-off date was suggested by the Joint Secretary in the Ministry, A.K. Srivastava, and was agreed to by senior officers and finally approved by Raja, the judgment reads. There was no conspiracy at all in fixing the cut-off date, and it was a pure and simple routine administrative exercise undertaken to streamline the processing of applications and to discourage speculative players—so goes the argument. In his deposition before the trial court, Srivastava, a prosecution witness, shifted the onus for fixing the cut-off date to Chandolia. During cross-examination, he said that he did not mention Chandolia’s name in the official note recommending the cut-off date because Chandolia, the Minister’s private secretary, had influenced him not to mention his name.

Judge Saini, however, disbelieved Srivastava and remarked that he tried hard to shift the blame to Chandolia by citing pressure as a reason for recording the note. He even said that the possibility of Srivastava himself suggesting the date of October 1, 2007, as the revised cut-off date could not be ruled out. The judge then said that Srivastava’s deposition did not inspire confidence and was contrary to the official record. He also said that another prosecution witness, K. Sridhara, then a member of the DoT, contradicted Srivastava by saying the note on the cut-off date had been put up after discussion between them, in view of the large number of applications. Srivastava’s deposition, therefore, was highly suspect and liable to rejection, Judge Saini said in his judgment.

A press release was issued by the DoT on September 24, 2007, which appeared in the newspapers on September 25, 2007, mentioning that the new applications for UAS licences would not be accepted by the DoT after October 1, 2007, until further orders. However, only applications received up to September 25, 2007, were considered, which was against the recommendations of TRAI that no cap should be placed on the number of Access Service Providers in any service area.

Even if what Judge Saini found is true, was it not expected of Raja to have applied his mind to the proposal to advance the cut-off date and reject it because it would be discriminatory? The judge has no answers to this in the judgment. After all, a civil servant’s proposal is not binding on the Minister, and the latter could have recorded the reasons for rejecting it in writing to make the whole decision-making process transparent.

Chandolia, in his deposition as a defence witness, disowned responsibility for the cut-off dates, saying that decisions on those were taken independently in the department, and denied that he was a party to the decisions. According to him, the cut-off date of October 1, 2007, was for receiving applications for UAS licence and September 25, 2007, was the cut-off date for processing the applications received up to October 1, 2007. Judge Saini accepts Chandolia’s deposition as reasonable as it matches with the official record, which is deemed to be correct in the eyes of law.

Relying on a 1981 judgment of the Supreme Court, Judge Saini says that defence witnesses are also entitled to equal weight. “Quite often they tell lies, but so do the prosecution witnesses,” he quoted the Supreme Court as having observed in that case.

Very often, the Supreme Court makes observations that are relevant only to the facts of a particular case, and they might not even have been relevant to the decision in those cases. Courts below ought not to rely on them as binding unless there is reason to believe that such observations are not obiter dicta . As Special Public Prosecutor Anand Grover makes it clear in his interview, relying on the evidence adduced by the accused as defence witnesses has its own risks.

Judge Saini mentions that the prosecution did not quiz Raja on whether he entered into any conspiracy with STPL and Unitech to help them in the matter of UAS licences and allocation of spectrum, and uses this as a reason for ruling out any conspiracy. Judge Saini, who asked Raja 1,718 questions under Section 313 of the Code of Criminal Procedure (CrPC), does not explain why he himself could not have posed the question to Raja. (Section 313 deals with the power to examine the accused during the trial. It says that the court may at any stage, without previously warning the accused, put such questions to him as it considers necessary, for the purpose of enabling the accused personally to explain any circumstances appearing in the evidence against him.)

Judge Saini says on Raja’s behalf that the date of October 10, 2007, or October 1, 2007, would not have made any difference to the Unitech Group of Companies which filed applications on September 24, 2007, or to STPL, which had applied as early as March 2.

Why did Raja advance the cut-off date to September 25, 2007? Again, there are no convincing answers in the judgment; there are only denials or assertions that it was decided after due deliberations within the department to meet an emergent situation caused by a steep rise in the number of applications.

After a lengthy discussion on the evidence, the judge concludes that the blame for the cut-off date of September 25, 2007, cannot be laid at Raja’s door alone. Then he leaps to the next conclusion that there is no material on record to show that the date of September 25, 2007, was fixed unilaterally, arbitrarily and without due deliberation by Raja in conspiracy with the accused companies. Therefore, the judge concludes, the prosecution has failed to prove that it was the result of any conspiracy.

Raja’s defence has been that there was a cartel force wanting to stop the legitimate efforts of the DoT to boost the tele density and reduce the tariff by way of injecting competition, which are the main objectives of National Telecom Policy-1999, and he claimed to have disclosed to Prime Minister Manmohan Singh how pressure was put on him through legal and other means to restrain himself from these efforts. It is not clear from the judgment whether Judge Saini agrees with this view.

The money trail

The issue relating to the suspicious transaction of Rs.200 crore from STPL to Raja through shell companies appears to be an open-and-shut case. It was alleged that Shahid Balwa and Vinod Goenka, both directors of STPL, paid illegal gratification of Rs.200 crore to Raja, which was accepted by Kalaignar TV (P) Limited, as a reward for grant of licences and allocation of spectrum to STPL by Raja, in conspiracy with the other accused, namely, Kanimozhi and Sharad Kumar. The amount was routed through Dynamix Realty, a partnership firm of DB group, which transferred the money to Kusegaon Fruits and Vegetables (P) Limited, a company in which Asif Balwa and Rajiv Agarwal were and still are directors.

This company further transferred the amount to Cineyug Flms (P) Limited, in which Karim Morani was and is one of the directors, and this company ultimately transferred the money to Kalaignar TV (P) Limited, in which both Kanimozhi and Sharad Kumar were directors. The prosecution alleged that this circuitous route was adopted to conceal the real nature of the transaction.

The prosecution had given the details of the cheques, the amounts and the dates when the money was transferred. Various documents such as share subscription and a shareholder’s agreement dated January 27, 2010, between Cineyug and Kusegaon and between Cineyug and Kalaignar TV were executed later on to show that the transaction was a bona fide one. Later, when Raja was summoned for an examination by the CBI on December 24, 2010, Kalaignar TV started refunding the amount to Cineyug, which, in turn, paid it back to Kusegaon, which again returned the same to Dynamix Realty.

The prosecution alleged that this amount was not properly reflected in the balance sheets of the companies, and no collateral securities were taken when the money was transferred from one company to another. The companies involved claimed that it was a loan transaction, but the rate of interest was below the market rate.

Judge Saini agreed that the transactions took place but found no evidence to suggest that they amounted to illegal gratification. The prosecution pointed to the speed with which the money was transferred from one entity to another.

But Judge Saini held that the mere movement of money, whether fast or meandering, did not make a transaction corrupt as people conduct their business according to their own business sense and acumen. The speed of money is an important characteristic of modern commerce, he held.

Judge Saini further reasoned that these transactions per se were not illegal. To make out a case of illegal gratification, these documents would have to be linked to a public servant, which was not the case, he held. He also referred to the prosecution’s failure to ask the witnesses from these four companies whether these transactions amounted to illegal gratification or to suggest that they were.

While the prosecution attacked the documents and transactions by way of arguments across the bar, no question was put to any witness in this regard when he was in witness box. Such questioning might have presented them with an opportunity to explain the transactions, Judge Saini reasoned. But he did not explain why he could not have posed the questions himself to the witnesses under Section 313, CrPC. Prosecution sources, however, say that such questions were indeed asked, but the witnesses did not have any answer.

Judge Saini pointed out that the prosecution did not suggest to Raja during cross-examination that the circuitous route for the transfer of money through the four entities was adopted at his instance, and documentation undertaken in this regard by these entities was bogus. No suggestion was put to him as to how and why this transfer of money was linked to him, and on what basis, Judge Saini said, without explaining why he did not put the question to Raja under Section 313.

Indeed, Judge Saini agreed with the prosecution that in a case of political corruption, no direct evidence would be available. But he reasoned that the witnesses could have easily explained the facts if they had an opportunity to do so. The prosecution did not afford an opportunity to them to explain the deficiencies in the documents; it remained silent and was now endeavouring hard at the bar to condemn the witnesses and documents executed by them, behind their back, Judge Saini asserted.

People cannot be held guilty without evidence that is legally admissible, Judge Saini concluded. The high-profile nature of a case cannot be used as a ground for holding people guilty without legal evidence; lack of commercial prudence in execution of documents cannot be used as a ruse to hold people guilty of corruption, he further reasoned. He ignored the strong circumstantial evidence against Raja.

The judgment may offer lessons to those who indulge in political corruption by ensuring that there are no direct links between illegal gratification of a public servant, and the public servant in question. The problem with Judge Saini’s judgment is that it rationalises such gratification as normal, because the public servant, who is sought to be gratified illegally by the beneficiary of his decision, can pretend to have no links with the final beneficiary of the money trail, despite strong circumstantial evidence pointing to it. Others may consider Judge Saini too naïve for justifying such overt transactions.